In every industry, continuous improvements in efficiency, production, and innovation pave the path to profitability. In the modern competitive business landscape, leaders must look for an edge in every element of their business, be it through higher quality products, lower costs, or shorter supply chain lead times. Lean management is a business model that can help organizations achieve these goals and more. Lean's purpose is to transform an organization's culture into one that values continuous improvement over the long term. Within a Lean framework, employees can become self-sufficient experts at solving even the most challenging problems.
How Lean Works
The Lean methodology, sometimes called "Lean production" or "Lean manufacturing," is a series of techniques designed to minimize the waste of labor and materials while maintaining or increasing levels of quality and production. The result is a net improvement in productivity and often profitability.
Lean originated in the Japanese manufacturing sector with the Toyota Production System. Toyota pioneered the practice of "just-in-time" manufacturing in which inventory is kept at the lowest possible "as-needed" levels. They also introduced the principles that human employees should supervise automation to ensure quality control (jidoka) and that downtime and transportation would be minimized.
Ultimately, Lean is designed to eliminate anything that does not add value to the customer and deliver the best possible product or service as quickly and with as little friction as possible.
Lean can help teams identify inefficiencies and implement improved workflows that save time and money through a time-tested process of standardization, visualization, and organization. In addition, lean management techniques can help leaders regulate production, make steady progress, and monitor key performance indicators.
The specific reasons that Lean is important and the ways it leads to success can be broken down into six significant categories.
One of the most beneficial Lean management techniques is Value Stream Mapping, in which each process or activity that leads to customer value is charted in relation to every other. This exercise, which is repeated frequently by Lean managers, reveals opportunities to eliminate waste and brings clarity to the organization's operation. For each activity, the question can be asked, "Why do we do this, and how does it further the purpose of our organization?" The ability to access the value stream requires a deep understanding of the organization's mission and what value means to its customers.
When organizations are aligned around a common purpose well understood by every employee, decision-making is more straightforward, priorities become apparent, and there are fewer disagreements and less friction. Ideally, each employee should understand how the work they do relates to the strategic goals and purpose of the organization. Individual performance evaluation should focus on metrics that are cascaded down from the strategic level to individual employees.
Standardization and Structure
The Lean approach to continuous improvement requires that each process and activity be standardized. The goal of standardization in Lean is not to stifle innovation, quite the opposite. Instead, the purpose is to set a baseline that can be monitored and measured, making it possible to determine if a future change results in better outcomes. The standard is documented and created by the process operators who do the work.
Lean also brings structure to the improvement project management process itself. Several useful tools, including the Plan, Do, Study, Adjust (PDSA) improvement cycle and A3 reports, guide how change is implemented. Cross-functional collaboration is more effective when the entire organization's structures change using the same tools. Another benefit of Lean is that the organization develops a common language around improvement. When everyone speaks the same language, the pace of change accelerates.
Employee Engagement and Development
Lean management is an employee-first approach. In fact, respect for people is a foundational principle of the discipline. Lean rests on the idea that the people closest to the work are the ones who are best positioned to recognize and implement opportunities for improvement. Leaders don't dictate which improvement projects should be prioritized. Instead, they ask for input, ideas, and action. As a result, employees gain a sense of ownership of the processes they operate and the improvement work they initiate.
Beyond daily improvement, Lean encourages employee development by introducing problem-solving techniques such as the 5 Whys and Catchball that help employees hone their reasoning and collaboration skills. The Lean framework recognizes that human potential is something that should never go to waste. Highly engaged employees produce better results, set an example for co-workers, and develop into an even more valuable resource for the organization.
When you start learning how to implement Lean, you'll find that the first step in optimizing the value stream is defining what value means to the customer. It is critical to understand the product lifecycle as seen by the customer. How do they obtain the item or service? How much are they willing to pay? How do they use it? How do they dispose of it when it is no longer of value? Forcing everyone to see through the eyes of the customer results in better product design, less over-processing waste, and a more competitive offering.
Of course, quality is an essential element of customer satisfaction as well. By eliminating the root causes of defects and rework, Lean organizations produce higher quality products and provide more efficient customer service.
When many people hear about Lean, mainly its focus on eliminating waste, they believe it is strictly a cost-cutting approach. While it is true that Lean often results in lower production costs through waste elimination, it is really more about optimizing resources rather than simply reducing them. Every dollar that is saved by eliminating waste like unnecessary inventory or transportation can be used in a way that adds value to the customer. Lean organizations can be more competitive by keeping customer costs low or adding features for which there is market demand. Financial advantages enjoyed by Lean organizations include:
Less costs due to defects and rework
Cost savings due to reduced employee turnover
Less capital tied up in inventory and storage
Faster time to market
More repeat customers
While financial metrics are critical and perhaps the easiest to measure, maybe the biggest reason why Lean is important is that it gives leaders a way to analyze and assess business performance. This is particularly the case when Lean software is used as a platform for collecting and visualizing information about the organization's continuous improvement efforts. In this way, Leaders have a view into who is contributing to the improvement culture, what types of projects are happening, and whether the work is aligned with the organization's purpose and strategic goals.
With the Lean framework in place, performance is significantly more predictable. When something is going wrong, or an objective is in jeopardy, leaders have an early warning system that allows for corrective action.
The Lean approach is popular because it accelerates the path to reaching an organization's most critical strategic goals. It centers both employees and customers and creates a united sense of purpose and pride. While it won't solve anything overnight, it is well worth the effort.